2-17-2009 – New Blog Post: Obama signs American Recovery and Reinvestment Act of 2009, $8,000 new home buyer tax credit is included; it’s not a loan.
UPDATE 2/12/2009: Economic Stimulus Plan – House and Senate drop the $15,000 tax credit for homebuyers; the revised plan limits the tax credit to $8,000 for first-time homebuyers that purchase a home before the August 31, 2009 deadline. The $8,000 tax credit is not a loan – Current price tag for the entire plan is $789 billion. (end update)
Senate Passes Economic Recovery Bill – will the $15,000 refundable tax credit for buying a new home be scaled back or eliminated during negotiations with the House on a final bill?
With three Republican supporters, the Senate passed President Obama’s economic recovery plan with a 61-37 vote. After trimming roughly $100 billion last Friday, the Senate bill will cost American taxpayers $838 billion; the House version of a similar plan would cost $820 billion. The next step for both the House and Senate versions of the bill is to create one final bill that pleases both parties, and have it ready for President Obama by this weekend so he can sign it into law.
Included in both plans is a tax credit for homebuyers, which is expected to cost taxpayers as much as $39 billion. The House bill allows for a $7,500 tax credit for first-time homebuyers and the Senate bill allows up to $15,000 in tax credits for all homebuyers. Opponents of the tax credit argue that it will do little to decrease high inventory levels because current homeowner’s would have to sell their current home to buy a new one. The Fix Housing First Organization is lobbying to keep the Senate provisions for the $15,000 tax credit, and to ensure that the credit remains available to the taxpayer as a tax refund and is not limited to first-time homebuyers. The organization states that first-time buyers make up only a small percentage of the total market and that including more buyers would enhance the success of the incentive. The Senate has a record of winning negotiations with the House, so the $15,000 refundable tax credit for all homebuyers has a good chance of staying in the final bill.
The major difference between the two bills in terms of jobs is that the Senate bill left out a school construction provision that will save or create 500,000 jobs; House Majority Leader Steny Hoyer said “The Senate bill costs more and creates a half a million less jobs”. Senator Susan M. Collins (R) of Maine gives her reason for excluding $60 billion for school construction spending, “I do not support the establishment of a new federal school construction program, because school construction traditionally has been a state and local responsibility”. I thought the goal was to create jobs, if $800 billion gets you 3-4 million jobs it seems like $60 billion for half a million more jobs is a bargain, but who wants to help states out, only 46 of them are facing severe fiscal problems.
Both versions (House and Senate) of the economic recovery plan include legislation for education and infrastructure improvements, tax cuts for lower-income wage earners and billions for unemployment benefits, food stamps, health care and other programs designed to help individuals during these harsh times. Side-by-side, 90% of the items in each bill are similar, the remaining 10% up for negotiation may stall progress and leave homebuyers, other consumers, banks and investors on the sidelines doing nothing, waiting for the information they need to move forward with financial decisions.
I bet the final Economic Stimulus bill ends up around $860 billion, what say you?
The good news is that after this plan gets passed, our economy will only be waiting on news about TARP II, the bad news is that creating plans is the easy part, implementing and regulating them has traditionally been the hard part. Crank up the money press and schedule overtime, after TARP II and this Economic Stimulus Plan become law, our government is could end up pumping more than $2.8 trillion into the economy. (20% of our nation’s current annual Gross Domestic Product). Is hyperinflation next?